Beginning Balance

Mark and Jesse ponder the philosophy behind Rule Three -- roll with the punches. At the end of the day, it's just flexibility! Jesse also takes issue with the concept of "overspending."   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse continue their philosophical musings over the Four Rules by considering the essence or first principle of Rule Two -- Embrace Your True Expenses. Some people have taken YNAB's position to be "we don't forecast," but Rule Two is all about forecasting. The idea here is to forecast your expenses, while only allocating dollars you have right now to those expenses.   There's a great reason for this. The dollars you have right now are real; they exist in your bank account. The known expenses you have in the future (like your water bill) are real too, you will owe them and they can't opt out of them. So it makes sense to budget with those numbers. Dollars you will make in the future aren't realized yet, so we don't budget them. YNAB does have targets to help budgeters plan for future dollars, but they aren't budgeted until they come in.   So, Rule Two is indeed about forecasting, and the first principle of Rule Two is forward thinking. Rule Two requires you to imagine yourself in the future, paying bills that you are racking up today but have not been billed for yet, and plan for those today, in the present. Doing so helps train your mind to then consider future expenses which have not been incurred yet, so you can make better decisions about allocating your dollars today.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse revisit YNAB's Four Rules to explore whether there's a deeper, more universal concept underlying them. It's often been said that Rule One -- give every dollar a job -- is about aligning your money with your priorities. While that is true, there's a deeper truth. Rule One is really all about tradeoffs, or opportunity cost, in that when you give a dollar a job, it then ceases to do every other job which it could have done. The tradeoff reveals the priorities, or value set, of the budgeter.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Thinking about taking the plunge and running your business on YNAB? Mark and Jesse covered the many benefits of doing so on the podcast in first episodes of Beginning Balance. Today, Mark goes deep into his onboarding process for new clients in his bookkeeping business, which uses YNAB for every client's financials.   As Mark details, if you get the onboarding process right, once you get to "maintenance" mode with your financials it's so smooth and fast to generate financials and know exactly where your money is at. The key to onboarding is in the details, getting your bank transaction import working smoothly (this may require changing banks!), setting good payee rules, creating expense categories for tracking different revenue streams (yes expense categories!), and choosing appropriate categories to feed into your P&L.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Data from annual PWC-led surveys, as well as YNAB's own surveys, make it clear that employees carry their financial stress into the workplace with them. In some cases, it simply results in less-happy employees; in other cases, more requests for paycheck advances and payday loans. Either way, it's a drag on workplace morale and relationships between employees, their employer, and their family at home (family relationship stress is often tied to money stress).   YNAB has developed a solution to workplace financial stress, called Financial Wellness. Financial Wellness allows businesses to provide YNAB to their employees as part of the benefit's package, with all the usual support, workshops, and other budgeting training that YNAB offers to direct customers.   Jesse discusses the Wellness service, the feedback received during the pilot program and beta testing, and how YNAB is positioning itself in B2B sales.   Financial Wellness by YNAB: https://www.youneedabudget.com/wellness/     Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse ponder the question, "when should you retire?" While many sources float out the 4% Rule, or some variation of it, that states you can pull out four percent of the value of your retirement portfolio each year without running out of money. The debates about the validity of the rule in current market conditions, and the withdrawal rate, are endless, but as Mark and Jesse observe, the decision to retire is an emotional one. At the end of the day, life is uncertain, and a person has to decide that they are comfortable enough with the value of their assets, their lifestyle, and their prospects to wake up one day and not go to work on Monday morning.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse field a question from listener Jose, who asked what he could do to improve the communication between his team during meetings.   Revising Prose by Robert Lanham https://www.amazon.com/Revising-Prose-5th-Richard-Lanham/dp/0321441699/ref=sr_1_1?qid=1656859182&refinements=p_27%3ARichard+Lanham&s=books&sr=1-1&text=Richard+Lanham   The Five Dysfunctions of a Team: https://www.amazon.com/Five-Dysfunctions-Team-Leadership-Lencioni-ebook/dp/B006960LQW/ref=sr_1_1?keywords=5+dysfunctions+of+a+team+book&qid=1656858556&sprefix=5+dys%2Caps%2C68&sr=8-1   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Let's say you needed some money, and you wanted to start a business with minimal lead time and startup cost. What would you pick? Mark and Jesse discuss the scenario, and lay out a strong case for starting a service business.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Businesses are concerned with profitability, and rightly so. If the business can't turn a profit, it can't stay in business very long! Calculating bottom line profitability is a fairly straightforward operation, but what about calculating the relative profitability of individual product lines or services? This is where things get complicated, and interesting!   Every product or service costs something to make or provide. There are fixed costs, such as machinery, tooling, and computers, as well as variable costs, like raw materials. These are fairly easy to measure and track for each product and service. But making different products or services also has additional costs, such as time (for setting up tooling and equipment to make a product, or for executing the tasks required for a service), as well as opportunity costs -- i.e. time and materials spent making this product are time and materials not spent making other products. So, how do you account for all that and determine which products and services net you the most profit?    Enter managerial accounting, which uses several processes to help you measure profitability in a variety of ways, including contribution margin and breakeven analysis. It turns out, accounting is pretty awesome!     Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse discuss the "curse of the superstar employee," that one person in your business that you can't imagine living without. The employee that does every task better than everyone else (probably faster too), with enthusiasm. While these are great people to have on your team, they can become bottlenecks for growth -- especially when they take on too many tasks, and too much minutiae in the business. Of course, there's a major operational risk to allowing superstar employees to "own" too much of the business' process. If that person leaves, or is out on vacation, there may not be anyone who can fill in the gap.   Mark and Jesse identify signs that you may be working under the curse of the superstar employee, how you can hire a stronger team with better processes, and develop your superstars into higher-level thinkers and managers.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com